Redbank Energy wins reprieve on funding

Struggling NSW power producer
Redbank Energy
has secured a five-month extension on a key financing facility but remains locked in discussions with its lenders in search of a more permanent solution to its funding woes.

The latest extension of the bank support agreement, to May 31, included the deferral of the repayment of principal and interest owing for the period to December 31, Redbank said on Thursday.

The news fuelled a 22 per cent surge in the shares yesterday, sending them up $1.56 to $8.51.

The restructured rump of Alinta Energy has been controlled by activist investors Bronte Capital and New York-based Coastal Capital since August 2011 after a TPG-led $2.1 billion debt-for-equity deal to save Alinta in 2010.

Its original financing agreement, which lapsed on March 31, 2012, included an agreement that the 151-megawatt Redbank power plant be sold by March 31, 2012. But no deal was reached and the coal-fired generator in the Hunter Valley is no longer being actively marketed for sale, chairman Richard Butler told the shareholders in November.

Mr Butler said the focus of management had switched to the proposed long-term refinancing of the plant. Redbank took out a $2.5 million liquidity facility and a $3 million working capital facility in March 2011. The bank support agreement has since been rolled over on a month-by-month basis. But earlier in January one lender, Syncora Guarantee, hesitated to extend again, citing a carbon dispute with NSW grid owner Ausgrid which it saw as critically important to the company.

The dispute centres around the ability for Redbank to pass through costs incurred from the carbon tax to the NSW government-owned network owner. The outcome will have a major impact on Redbank, given its carbon tax liability for 2012-13 is about $28.3 million.

The parties last year invoked a formal arbitration process to resolve the dispute, with a decision from the arbitrator due mid-February.

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Redbank said it had agreed on a series of “detailed steps" with the lending syndicated with the aim of permanently restructuring the debt facilities by May 31. That would involve with amending current obligations under the funding documents, or a refinancing, it said. Progress towards the restructuring will be assessed on March 31.

It also said it would work with its lenders throughout this month “to agree a strategy to ameliorate potential asset value destruction should Redbank Project’s directors form the view that the company is insolvent or likely to become insolvent during the bank support period".

Redbank’s manager, corporate, John Remedios, wasn’t immediately available to comment.